Consumer Confidence Waning Economists Say They Are Vexed by Flood of Mixed Signals and Unreliable Statistics
Amy Kaslow, writer of The Christian Science Monitor, The Christian Science Monitor
CHARLIE LEMMER, owner of Chazco Van Lines, heaved a sigh and leaned on the furniture his men had just moved. He started his Virginia-based moving business in 1980, and until this year, he enjoyed the boom years of the Washington metropolitan housing market.
But "since the beginning of this year," he says, "the slow times have been really slow, and we've had to spend more money and work harder to make the same revenue."
With higher costs and less business, Mr. Lemmer is considering layoffs. Parents of two, he and his wife used to frequent shopping malls; today, he says, they're very careful about what they spend. "People are afraid to spend money, and they're putting off making moves and buying furniture. If I knew what the next year was going to bring, I wouldn't be worried."
According to recent surveys, Lemmer is joined by a majority of Americans who are uncertain about the nation's economy. A recent New York Times poll reveals that seven out of 10 American consumers lack confidence.
Their recession fears are compounded by mixed signals from economic experts, who offer no clear picture of what lies ahead.
Economists are vexed by so many unknowns - the threat of war, the volatile oil market, the extent of divestment from US securities by foreign investors, a federal-budget impasse, and an elusive Federal Reserve Board policy on interest rates - they admit that forecasting is tougher than ever.
Given the unstable environment, says a Commerce Department analyst, statistics that show present economic activity are increasingly discounted in projecting future developments.
"It's unusual that we have so many things (economic indicators) that are hard to read. Most of the 11 leading economic indicators - such as stock prices, industrial production, and contracts and new orders for plants and equipment - are unpredictable," he says. "These indicators have been moving around a great deal - up and down during the past months."
"People were talking about a recession a year ago, but we still haven't had ... months of negative growth associated with a recession," he adds.
In August, the index of leading indicators dropped 1.2 percent, the most dramatic monthly fall since the jolt caused by the Oct. 19, 1987, stock market plunge.
Many sectors of the economy have been weak "for a long time," says Lea Tyler, a senior economist with Wharton Econometrics in Philadelphia. Barring war and higher oil prices, she predicts a mild recession in a few months' time.
Roger Kormendi, a professor of Business Economics at the University of Michigan, says that current analysis comes largely "from business economists trained a long time ago in forecasting methods that are now archaic. We can no longer forecast from past trends, because economies are fundamentally changing."
Consumer confidence is clearly waning. University of Michigan's Index of Consumer Sentiment - a barometer of consumer confidence - plummeted 25 percent from April to August.
"Consumers believe their conditions are going to be worse and there is tremendous uncertainty," says Professor Kormendi. This leads consumers to tighten their purse; less spending means a slower economy. …